A Little Bit of History and why it Matters Today.

Ok, as promised, here are my thoughts on the probable collapse of the US Dollar and why it’s important in the precious metals market and for you.

For those of you that don’t know, the US Dollar became the global reserve currency almost by accident. Following the aftermath of WW2, European countries were broke and had no money to stimulate domestic growth; the US on the other hand had money, principally because it had a store of Gold and Silver.  It is from this foundation that the US began to ‘sell’ countries debt/money to stimulate economic growth, and to make international trade deals for necessary commodities (Oil etc…) This also meant that those same states held a reserve of US Dollars in their vaults, ergo, the US Dollar/debt becomes indispensable for growing Western economies, and became the world reserve currency.

What it this Gold standard everybody keeps talking about?

Under the gold standard, a government is limited – legally and practically – as to how much paper money it can print. As recently as the Lyndon Johnson administration, the U.S. could print paper dollars equal only to four times the value of the nation’s gold reserves.  What this means is there is resistance to how much the economy can grow or to put it another way, there is stability in economic growth!

What does this have to do with Gold and Silver prices today, After the US came off the Gold standard in 1971 under President Nixon, the Federal Reserve began printing currency into existence! (this is a very short version of the facts), therefore devaluing the Dollar!  Fast forward to current global economic opinion….

China

Enough of the history lesson, Check out this article written by MoneyMornings Peter Krauth  - China Article

…don’t want to read it all? Ok, he is saying China wants its Yuan to become the world reserve currency because there is a general feeling amongst the global economy that the Dollar is done.  China has stepped up to the plate and has already circumvented many international agreements on trade with using the Dollar and has orchestrated bi-lateral agreements for trade with the Yuan, to quote ‘..they’ve called for efforts to “de-Americanise” the global economy’………Interesting?

Global reserve currencies lifespan are on average 95 years take a look at this chart from the MoneyMorning link above.

Wow, what does this mean?

China is making moves in currency swapping with major stakeholders, principally the European Central Bank (ECB) and S.Korea, accepted that this only accounts for 8% of global traded currency, but they have to start somewhere; and when compared with the losing faith and lack of trust in the US Dollar, what would you do? You might say, “I’m going to buy some Yuan”,…. I’d say look at what China is doing to create the conditions for the Yuan’s emergence as a potential new World Reserve Currency…….. Its buying Gold and Silver.  Again look at this link posted here on 20 Jan 14 Here again for those that missed it.

Gold and Silver Future Prices

It’s usually questionable to quote future prices for anything, after all nobody can predict the future; but as and educated and informed assertion, and considering the factors at play over the past 5 years, I am voting with my feet and support predictions for Gold and Silver to rise in price…. In fact ill prove it.

Take a look at this chart I posted on this blog and what I said on 20 Jan 14.

Ok, now look at the same chart 3 weeks on…!

Its moving as expected, its not a matter of guessing the prices will rise, it’s an educated and informed assertion… if you know what you are looking for.  Thankfully for you, ill do all of the legwork for you and all you have to do is read this Blog.

Ok so you want a figure? You want to know when prices are going to rise?.........  that will come in later posts so keep watching for updates.

Happy investing